Police, meanwhile, said they will seek arrest warrants for eight protest leaders from the People's Alliance for Democracy as well as a court order to force the protesters to leave the compound known as Government House.
Alliance protesters, who accuse Prime Minister Samak Sundaravej of corruption and of being a proxy for his disgraced predecessor, have camped in a huge garden outside Government House offices in since scaling fences there Tuesday afternoon. They have remained peaceful and have not tried to enter any government buildings.
About 500 helmeted riot police forced their way into the compound overnight, briefly clashing with protesters. But the police later backed off from the confrontation, while establishing themselves inside the compound and mingling with protesters at the perimeter.
The early morning clash did nothing to shake the resolve of the protest organizers. The alliance accuses Samak of being too close to former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup and faces several pending corruption cases. Thaksin is in self-exile in Britain.
"If we leave before this government resigns, that means we are defeated," Chamlong Srimuang, one of the protest leaders, told the crowd inside the compound.
The alliance, which is loosely aligned with conservative factions of the monarchy and the military, said the protests and the seizure Tuesday of a state-run television station by a mob of their masked security enforcers were a "final showdown" in efforts to oust the government.
The takeover of the Government House compound was the latest twist in a political crisis that began in early 2006, when critics of Thaksin established the alliance to force him from office over allegations of corruption and abuse of power.
In September 2006, the military deposed Thaksin in a bloodless coup while he was abroad. His party was dissolved and he was banned from public office until 2012.
But Samak led Thaksin's political allies to a December 2007 election victory, and their assumption of power triggered fears of a political comeback of Thaksin, whom remains popular with the country's rural majority.
The alliance responded by resuming their protests in May, accusing Samak of trying to amend the constitution to Thaksin from a string of corruption charges.
Thaksin skipped bail ahead of his latest corruption trial and went to England, contending he can't get a fair trial in Thailand.
Tuesday began with a violent, pre-dawn raid by about 80 masked alliance members armed with guns, knives and golf clubs on the main studios of the government-run National Broadcasting Services of Thailand, known as NBT. The protesters claim the station is a government mouthpiece.
Then, up to 30,000 joined protests outside four government ministries and Government House. By late Tuesday afternoon, protesters had stormed the Government House compound, and several thousands remained around the site Wednesday.
Samak told reporters Tuesday the government would not use force to eject the protesters, but was preparing legal action against them. He said he had no intention of resigning and expected to end the crisis in a day.
He accused the protesters of trying to spark a confrontation with authorities that would lead to violence.
"They want bloodshed in the country. They want the military to come out and do the coup again," he said.
Gen. Anupong Paochinda, the army chief, reassured the public Tuesday that the military was not planning another coup, and would not get involved in politics.
On Wednesday, Police Lt. Gen. Suraphol Thuanthong said the government would seek arrest warrants for the protest leaders. He did not say on what charges but the Bangkok Post said they will face charges of organizing a gathering of 10 or more people to cause a public disturbance and refusing to obey police orders.
But with neither side offering to compromise, analysts said it was unlikely the standoff would be over anytime soon.
"I still cannot see an easy end to the turbulence," Charnvit Kasetsiri, a historian from Bangkok's Thammasat University, said. "It might take days or months until everything reaches the point where violence erupts."
The mood among protesters at Government House was relaxed Wednesday, even if the speeches were fiery. Many enjoyed picnics or took photos near historic landmarks.
"We are ready to go to jail if police come to get us," said Wanchart Sriakson, from the tourist island of Phuket.